New Bitcoin investors are under severe stress, according to Bitfinex

The current market situation has put many new Bitcoin investors under financial stress. This is evident in several metrics that indicate a bearish environment and highlight factors that may intensify market volatility, increase selling pressure and lead to further price declines.

According to a Bitfinex Alpha report, metrics such as Short-Term Holder MVRV (Market Value to Realized Value) and Standard Deviation (SD) of Short-Term Holder Cost-Basis show that new market participants are seeing significant losses in the his bitcoin (BTC) investments.

BTC Investors Under Stress

The short-term holder MVRV ratio compares the fair market value of BTC to its realized price, focusing on the most recent cohort of investors. A ratio below one indicates that short-term holders and new investors are experiencing unrealized losses. This means that the current market price of BTC is less than what they paid for their purchases and they would sell at a loss.

At press time, the short-term holder’s MVRV ratio shows that new investors are sitting on the biggest unrealized losses since bear market lows in 2022. Bitfinex analysts said the metric underscores the depth of the market downturn and the level of financial stress this cohort of investors is experiencing.

“Such conditions may exacerbate market volatility, as these investors may be more prone to panic selling during further price declines, which may lead to accelerated declines in the price of bitcoin,” the analysts said.

How Serious Is Bitcoin’s Latest Correction?

The -1SD move below the short-term holder’s cost basis also reveals the substantial extent of negative sentiment and stress among new market entrants. Additionally, the SD band provides insight into how often the price of bitcoin falls below the average purchase price of recent investors, indicating the level of losses within this cohort.

Bitcoin’s latest dip below $50,000 saw the asset’s spot price move closer to the -1SD band, indicating an intense market decline. This occurrence is so rare that it has only been recorded in 364 out of 5139 BTC trading days.

“This situation not only reflects the strong pace of the decline, but also serves as a crucial signal to investors about the extent of negative sentiment and potential stress among new market entrants. Such insights are valuable in assessing market conditions and potential recovery scenarios,” the analysts added.

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